1. Field of the Invention
This invention relates generally to data authentication, and, more particularly, to systems and methods for authentication of financial instruments.
2. Description of the Related Art
Checks continue to be a popular medium of financial exchange. Many individuals who are issued checks from second parties, such as paychecks from their employers, prefer to cash the checks rather than to deposit them in a bank account before withdrawing the funds. For example, many people prefer to cash their paychecks at a grocery store or check-cashing establishment. Furthermore, individuals who do not have bank accounts in which to deposit checks often depend on cashing their paychecks, government checks, and other checks at such establishments.
Businesses that cash checks for their customers take a risk that if they agree to cash a given check, they may be unsuccessful themselves in attempting to settle the check with the issuing bank. Forged checks, stolen checks, checks that have been fraudulently altered, and checks written on accounts with insufficient funds or on accounts that have been closed all contribute to losses sustained by entities that agree to accept checks for cashing. Some check-cashing entities now charge increased fees for their check-cashing services in order to compensate for losses due to the acceptance of fraudulent checks.
A check that is written by one party for cashing by another party is often known as a “second-party check.” For example, a payroll check issued by an employer to an employee and presented by the employee for cashing at a grocery store may be classified as a second-party check. Businesses that cash second-party checks face extra difficulties in determining whether to accept a check presented to them for cashing because, in addition to assessing the identity and trustworthiness of the check presenter, they would like to be assured that the issuer of the check, who is typically not present, is in fact willing to authorize payment of the check.
Positive pay information is information compiled by a check-issuer about checks that the check-issuer has written against the funds in an account, often comprising information about a check number, issue date, payee name, and amount associated with a check. Thus, positive pay information is similar in many respects to information that an individual may record in his or her checkbook register about checks that have been written.
Some check-issuers, especially those writing many checks, such as large employers and businesses, may make a copy of their positive pay information available to the bank that holds their check account, with the agreement that the bank is not authorized to release funds from their check account other than for payment of those checks listed on the provided positive pay file. When a check is presented to the bank for cashing, comparing information from the face of the check with information in the positive pay file helps the bank to avoid withdrawing funds from the check-issuer's account for the payment of fraudulent checks. For this and other reasons, the use of positive pay information has proven very beneficial to banks and to check-issuers.
Check-cashing entities that cash negotiable instruments of various types, such as second-party checks, may also benefit from access to positive pay information for checks that have been presented to them for cashing. Accessing a positive pay file associated with a second-party check that has been presented for cashing is one method for checking on the authenticity of the check before making a decision to accept the check for cashing. Finding a record in the positive pay file indicating that information from the presented check matches a check listing that is authorized by the check-issuer may serve to increase confidence in the legitimacy and “cashability” of the check. Finding a record in the positive pay file indicating that the same check has already been paid may serve to increase suspicion in the fraudulent nature of the check and may decrease confidence in the “cashability” of the check. Thus, access to relevant positive pay information may help check-cashing entities more accurately assess the risk of proposed check-cashing transactions.
However, when a bank accesses positive pay information for a check from one of its own accounts before disbursing funds from that account, the desired positive pay information for the account is often easily locatable and readily accessible by the bank.
The situation is different for check-cashing entities, which may be presented with checks drawn on a wide variety of accounts and issued by a wide variety of check issuers, both known and unknown to the check-cashing entity. The check-cashing entity may thus face much more difficulty in attempting to locate and to access the desired positive pay information to help in assessing the risk of approving proposed cashing transactions.
A check-cashing entity, or a check authentication service working on its behalf, may negotiate in advance with a variety of check issuers or other positive pay information sources to arrange for access, sometimes in exchange for a fee, to the positive pay information available from the sources. Thus, relations may be established with a number of positive pay information sources allowing for queries to be sent to one or more of the sources regarding a check presented in association with a proposed check-cashing transaction.
In association with some proposed check-cashing transactions, it may be easy to identify and to access a single positive pay information source that stores the desired positive pay information. In other situations, when a single, definitive source of positive pay information for a presented check is not readily identifiable, a plurality of positive pay information sources may be accessed in an attempt to locate the desired positive pay information.
However, positive pay information inquiries associated with proposed check-cashing transactions frequently take place while an individual presenting a check waits for the check to be accepted and cashed. Given a large number of positive pay information sources that may potentially hold desired positive pay information for a presented check and a limited amount of time typically allocated for positive pay authentication of the check, an undirected search of the available positive pay sources may fail to locate appropriate positive pay information for the check in question within an acceptable time frame. Furthermore, since only a fraction of available positive pay information sources typically store information relevant to a given check, in an undirected search, valuable system resources, as well as time and money, may be expended for querying positive pay information sources that are not likely to hold the desired information.
Thus, benefits that may be afforded to a check-cashing entity by an ability to access valuable positive pay information from a variety of sources when a single, definitive source cannot be identified may be undermined by an inability to access the sources in a selective and efficient manner.